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The war on taxes

  • Published at 06:00 pm April 6th, 2013
The war on taxes

While most of the recommendations made by the DCCI to the NBR as they contribute to the new budget are sound, the concerned agencies should ignore the request to slap higher import duties on finished goods in the name of protecting infant industries.

By and large, the main missive put forth is that the tax bracket in Bangladesh should be extended. In a country of 160 million, it is ludicrous that only 1.4 million pay income taxes. Instead of focusing on increasing the rates, they should bring more able people under the tax umbrella to ensure that the government still receives some much-needed revenue. The other points made would also, in general terms, boost our industrial sector.

What the government should take issue with, is the proposal that import duties on finished goods should be raised. While the infant industry argument is understood, historical precedent shows us that the ideal is not easily applied. Instead of giving local industries the time they need to develop and gain economies of scale, protectionist measures instead shield inefficient local businesses and allow them to become lethargic – the burden is ultimately borne by the local consumers.

On the other hand, if the government were to lower or do away with import duties, it would force local industry to adhere to best practices and improve efficiency to remain competitive. While the DCCI may argue that it is impossible for local business to compete internationally without some protection, we have plenty examples of businesses that have done just that. The members of the DCCI should focus on making their businesses better, as opposed to just having everything made easier for them.

In this situation, everyone eventually benefits. Local consumers face lower retail costs, the businesses become more competitive which allows them to compete in the international market, and the knock-on effects of increased industry means that the government also benefits from macroeconomic improvements.